HUL shares today surge over 10% to record high

Shares of FMCG major Hindustan Unilever Ltd (HUL) today surged as much as 11% to a new high of ?2,399. In comparison, benchmark index Sensex was up about 6%. HUL is a handful of stocks that have been able to escape the market correction over the past few weeks. Analysts say that rising demand for personal hygiene products has brightened the prospects for India’s largest consumer company.

“We expect HUL to be resilient in the current economic scenario and deliver mid-to-high single digit volume growth over next two years,” Centrum Broking said in a note, which estimates HUL to post a 4% volume growth in the fourth quarter.

HUL on Wednesday announced the completion of merger of GlaxoSmithKline Consumer Healthcare Ltd (GSKCH) with itself, almost 15 months after the announcement of the mega deal. The board of HUL also gave its approval to the acquisition of the Horlicks brand from GSK for ?3,045 crore as part of an option available in the original agreement made between HUL and GSK.

Besides, other health food drinks brands of GSKCH – Boost, Maltova and Viva – would come to HUL’s portfolio by virtue of the merger, making it a leading player in the segment.

“HUL, with the closure of merger of Glaxosmithkline Consumer Healthcare with itself, is set to become the biggest food company in India. Merger positives according to us are: (i) EPS accretion of 4.5% (factored in FY21 numbers); (ii) Access to low penetrated (approx 23-25%) and high scope of premiumisation health food drinks portfolio; (iii) 800-1,000 bps margin expansion potential in GSK’s portfolio (part achieved, more room ahead); (iv) Opportunity to deepen penetration in chemist and other channels of future; (v) Potential tax benefit from acquisition of the Horlicks brand as well as amortisation of goodwill on merger; and (vi) Possibility of HUL becoming top revenue contributor to Unilever by approx FY27,” Edelweiss Securities said in a note.

“While the ongoing COVID-19 crisis will impact near-term revenue growth (especially of beauty and personal care, refreshments, and other non-essential portfolios), we believe the long-term growth potential is exciting. Maintain ‘BUY’ and retain HUL among our top picks,” the brokerage added.